8:05 AM, 6th September 2011, About 12 years ago 1
The cost of buying a rental home is set to rise again as banks and building societies tighten their grip on hidden fees
New rules culling the number of property professionals that can act for buyers mean choice of lawyers and valuers is limited.
Lenders claim the move is to fight fraud because property professionals, including mortgage brokers, are often involved in easing paperwork through for bogus loan applications.
But for buyers who want to instruct their own solicitor or valuer, the price of processing a mortgage is often doubled and the transaction slowed down by introducing another layer of professionals.
The move is seeing hundreds of small firms of property professionals leave the market as fraud claims have pushed up the cost of indemnity insurance that makes dealing with a low number of purchases uneconomical.
Many family firms or small partnerships that have serviced landlords buying rental property for years are finding clients are shifting to larger rivals on the lending ‘approved list’.
“There has been a significant amount of fraud and loss to lenders and their clients out of conveyancing in recent years,” says the Council of Mortgage Lenders, the trade voice for banks and building societies.
The effect for landlord is mortgage lenders now control the market – buyers either deal with the professionals they dictate or hire two lawyers or valuers to duplicate work.
Add to that massive booking and administration fees – generally around £1,000 but sometimes up to 3.5% of the loan – and buy to let mortgages and remortgages are costing more even though headline interest rates at their lowest for some time.
The industry fears that the buy to let and residential mortgage markets will end up with firms of ‘super’ conveyancers and valuers as the number of firms contracts.
The Law Society has already started a new accreditation scheme for conveyancers. Behind the scenes, industry professionals suggest that this was in response to a tarnished reputation after several high profile mortgage fraud cases involving lawyers.
Valuers have also faced a torrid time in court defending claims of misstating property prices and rental yields during the buy to let boom years.